Item 5.02 Departure of Directors or Certain
Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers
On February 11, 2008, AVI BioPharma, Inc.
(the Company) announced that its Board of Directors had appointed Leslie
Hudson, Ph.D. as the Companys Chief Executive Officer, effective as of February 8,
2008. As of that date, Dr. Hudson
assumed the responsibilities of the Companys Chief Executive Officer from K. Michael
Forrest, who had served as the Companys interim Chief Executive Officer since March 2007,
pending the appointment of a new chief executive officer for the Company.
Effective with Dr. Hudsons appointment
as the Companys Chief Executive Officer, Mr. Forrest ceased to serve as
an officer of the Company. Mr. Forrest
will continue as a member of the Board of Directors. Also effective February 8, 2008, Dr. Hudson
was appointed as a member of the Companys Board of Directors.
The information contained
in the Companys press release dated February 11, 2008 in connection with
the announcement is included as Exhibit 99.1 to this Current Report on Form 8-K
and incorporated herein by reference.
Dr. Hudson, who is 61
years old, served as the interim President and Chief Executive Officer of
Nabi Biopharmaceuticals from February 2007 to January 2008. Dr. Hudson
served as Chief Executive Officer and President of DOV Pharmaceutical, Inc.,
a biopharmaceutical company, from June 2005 to July 2006 and served
as Vice Provost for Strategic Initiatives at the University of Pennsylvania
from 2003 to June 2005. From 1995 to 2003 he served in several positions
at Pharmacia Corp., including senior vice president of research &
exploratory development, senior vice president of emerging technology &
commercial development and general manager & group vice president of
ophthalmology. From 1988 to 1994, he worked at GlaxoWellcome (now
GlaxoSmithKline plc) in several senior research positions including vice
president for discovery research. Dr. Hudson serves on the boards of directors
of Nabi Biopharmaceuticals and Hooper Holmes, Inc.
Employment Agreement
Effective February 8, 2008, the Company
and Dr. Hudson entered into an Employment Agreement (the Employment
Agreement) providing for Dr. Hudsons at will employment by the Company. Under the terms of the Employment Agreement, Dr. Hudson
is entitled to an initial annual salary of $480,000, which amount is subject to
review for potential increase, but not decrease, on an annual basis. In addition to his base salary, Dr. Hudson
is entitled to an annual bonus based upon the Companys and Dr. Hudsons
achievement of performance objectives established by the Companys Board of
Directors, with the target bonus level being equal to 60% of Dr. Hudsons
base salary. The Employment Agreement
further provides that Dr. Hudson will be renominated to the Board of
Directors each time his term would otherwise expire.
On that same date, in connection with his
employment as the Companys Chief Executive Officer, the Company granted to Dr. Hudson
options to purchase 667,000 shares of the Companys common stock under the
Companys 2002 Equity Incentive Plan, with an exercise price equal to the fair
market value of the Companys common stock on February 8, 2008, which was
$1.09 per share. Subject to certain
exceptions, the options vest in equal annual installments over a period of four
years. In addition, on that same date
the Company granted to Dr. Hudson 333,000 shares of the Companys common
stock. A portion of the shares of common
stock are subject to forfeiture, with 100,000 shares vesting on February 8,
2008 and 233,000 shares vesting in equal annual installments over four years
commencing on February 8, 2008. The
Company is also required to reimburse Dr. Hudson for all expenses
reasonably incurred by him in discharging his duties for the Company.
In addition to the compensation described
above, Dr. Hudson is entitled to receive (i) health care benefits for
him and his spouse, (ii) reimbursement of up to $25,000 in legal fees
incurred by Dr. Hudson in connection with the negotiation of the
Employment Agreement, (iii) a monthly living allowance of $4,500 for a
period of twelve months, subject to extension in certain circumstances, (iv) a
car allowance of $1,000 per month, (v) reimbursement of moving expenses
and reasonable and customary costs of selling a residence in Princeton, New
Jersey, as well as two round-trip economy fare airplane tickets for relocation
purposes for each of Dr. Hudson and his spouse, (vi) during the first
year of employment, reimbursement for up to four round trip economy airplane
tickets per month for travel actually incurred between Portland, Oregon and
Bend, Oregon, (vii) four weeks of paid vacation per year, as well as paid
holidays generally available to senior executives, (viii) $9,500 per year
for reasonable expenses incurred in connection with Dr. Hudsons federal
and state income tax returns and investment advice, and (ix) subject to
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eligibility
requirements, participation in benefits and programs generally available to all
employees or executives. Further, the
Company is required to provide Dr. Hudson with the Companys standard
directors and officers insurance policy, and indemnify and hold Dr. Hudson
harmless from liability arising out of his services to the fullest extent
permitted by Oregon law. The Employment
Agreement further provides that Dr. Hudson is entitled to receive certain
tax gross-up payments.
The Employment Agreement provides that, for a
period of two years following Dr. Hudsons termination of employment with
the Company, Dr. Hudson may not engage in certain activities in
competition with the Companys business activities, to the extent those
competitive activities relate to five competitors specified by the Company
prior to Dr. Hudsons termination. Dr. Hudson
is further prohibited, for a period of two years following termination of
employment with the Company, from recruiting, hiring, or assisting a third
party in hiring any person then employed by the Company.
During the first year of employment, the
Employment Agreement provides that Dr. Hudson may voluntarily terminate
his employment with the Company, with or without Good Reason (as defined in
the Employment Agreement), upon 90 days written notice to the Company. Thereafter, written notice will be reduced to
not less than 30 days. The Company may
terminate Dr. Hudsons employment without Cause (as defined in the
Employment Agreement) and other than in connection with a Change in Control
(as defined in the Employment Agreement) upon 30 days written notice. Dr. Hudsons employment is terminated
upon death, disability, or upon the effective date of a notice sent by the
Company to Dr. Hudson terminating him for Cause.
Payments Upon Termination
Upon Dr. Hudsons voluntary termination
of employment (other than with Good Reason) or termination of his employment
for Cause, the Company must pay to him all base compensation, unpaid
reimbursements, gross-up payments, and other unpaid expenses due through the
effective date of termination, and any unused vacation accrued according to the
Companys policies. However, Dr. Hudson would not be entitled to any other
compensation, including the right to receive any bonus relating to the year in
which such termination is effective.
Upon Dr. Hudsons death or Disability
(as defined in the Employment Agreement), the Company must pay to his estate
all base compensation, earned but unpaid bonuses, unpaid reimbursements, gross-up
payments and other unpaid expenses due at the date of death, plus a
continuation of base compensation and benefits at the rate set forth in the
Employment Agreement for six months following the end of the month in which the
death occurs. Dr. Hudsons estate will
also have six months to exercise all vested stock options.
Upon termination of Dr. Hudsons employment
by the Company without Cause or by Dr. Hudson for Good Reason where no
Change of Control has occurred, the Company is required to pay to Dr. Hudson
(i) all base compensation and earned but unpaid bonuses, and unpaid
reimbursements, gross-up payments and other unpaid expenses due at the
effective date of termination, (ii) the sum of (x) two years of base
compensation, (y) two years of bonus compensation based on the average of
the past two years bonuses actually paid or, if only one years bonus has been
paid, such bonus, or if no bonus has been paid, 50% of the target bonus for the
current year, and (z) two times the then current annual cost of health
benefits. If termination occurs before February 8,
2010, fifty percent of unvested options and fifty percent of unvested shares of
common stock granted pursuant to the Employment Agreement will immediately
become fully vested and exercisable. If
termination occurs on or after February 8, 2010, all unvested options and
all shares of common stock will immediately become fully vested and
exercisable. The exercise period of all
vested options granted to Dr. Hudson pursuant to the Companys 2002 Equity
Incentive Plan will be the earlier of their original expiration date or six
months from the effective date of termination.
Upon a termination of Dr. Hudsons
employment by the Company without Cause or by Dr. Hudson for Good Reason
that occurs within twelve months of a Change of Control, the Company is
required to pay to Dr. Hudson (i) all base compensation, earned but
unpaid bonuses, and unpaid reimbursements, gross-up payments and other unpaid
expenses due at the effective date of termination, (ii) the sum of (x) two
years of base compensation, (y) two times the target annual bonus at the
effective time of termination, and (z) two times the then current annual
cost of health benefits, car allowance, expenses incurred in connection with
tax preparation and investment advice, and continued
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